Middle East Unrest Sparks Surge in European and Asian Gas Prices

Benchmark European wholesale gas prices witnessed a significant rise, closing 35-40% higher on Monday. This surge followed an announcement from Qatar Energy, a major LNG exporter, stating the suspension of production due to escalating violence in the Middle East. The halting of cargos through the Strait of Hormuz has further exacerbated concerns about the length of this disruption.

Qatar, poised to become the world's second-largest LNG exporter, plays a crucial role in satisfying both Asian and European LNG demands. Sources informed Reuters that QatarEnergy might soon declare force majeure on LNG shipments. Energy analyst Scott Shelton from TP ICAP suggested this decision was precautionary given the volatile situation, leaving markets anxious over the duration of halted gas flows amid Middle Eastern conflicts.

As the EU shifts from Russian to Qatari LNG sources, this suspension has sparked fears of heightened global competition and increased prices. In Asia, LNG prices also rose sharply, with the Japan-Korea-Marker climbing nearly 39%. Analysts predict a continued disruption could drive European TTF and Asian JKM prices to dramatically higher levels, reminiscent of the 2022 European energy crisis. A meeting of the EU's gas coordination group has been scheduled to assess the conflict's impact further.